Fashion and Consignment Shopping: Unlikely Coupling or Growing Trend?

The foundation of the fashion industry has been built on brands and retailers persuading women to re-fill their closets, investing in "must haves" each season. But this premise is losing ground as consumers realize they need neither brand new outfits to look stylish nor follow the fashion dictates of magazine editors. The Internet is filled with blogs and Instagram feeds to get ideas aplenty. Shoppers are flocking to online consignment sellers to find unique items and deals, eschewing department and specialty stores.

Check out Poshmark, Tradesy and The RealReal. Their sleek websites, mobile apps, and social media feeds feature a treasure trove of gently worn clothing, shoes, handbags and jewelry by fashion and luxury brands such as Tory Burch, Prada and David Yurman. Individual consignment sellers are eagerly sharing their wardrobes and buyers are scoring coveted items at 60 percent off or more the suggested retail price.

What explains this flurry of activity at consignment e-tailers?

For one, there is no turning back from a bargain-hunting mentality that continues to prevail post-recession. Off-price sales have risen to 75 percent of U.S. apparel spending, according to NPD's Checkout Tracking Service. Fast fashion brands have made deep inroads into the global retail marketplace with state-of-the-art production techniques, well merchandised assortments and a continual flow of new goods at low prices. 

This flurry of cheap and cheerful shopping has resulted in overflowing drawers and closets. Indeed, custom closet makers and professional organizers have found that clients seeking their services actually wear just 20 percent of their wardrobes. Many of us have too much stuff.

It's not all Marie Kondo's fault.

Enter Japanese author, Marie Kondo, with her de-cluttering manifesto. It's unlikely Ms. Kondo had a diabolical plan to blow up the apparel industry. When her book, "The Life-Changing Habit of Tidying Up" was published in 2014, it struck a chord with millions. By encouraging her readers to scrutinize their possessions with the KonMari methodology, they have unloaded things that don't fit, don't make them feel good or "spark joy." In turn, consignment sellers have been barraged with clothing and accessories by those seeking to monetize their discards and transform their closets into boutiques.

Entrepreneurs found solutions to simplify the consignment selling process, making the transactions quick and easy online. Instead of a consignor waiting months for an item to sell at a physical store and receiving approximately 50 percent of the sale price, online goods may move more quickly and sellers get up to 80 percent of the sale. Some individuals are earning enough money to make it a full-time occupation.

As a result, e-resellers are amassing inventory of the hottest luxury and fashion brands. Poshmark CEO Manish Chandra says, "women are uploading a million dollars of clothing every day." When asked about disrupting the wholesale/retail model, Chandra comments, "We are providing a platform where the consumer is going naturally." His model is indicative of the how 21st-century retail is evolving.

Watch a "Posh Party" in action. Partygoers are on their laptops or smartphones interacting with fellow "poshers" and perusing the closets of sellers with handles such as Justfabnotdrab, Sheer Glamour, and Barbie_doll88. These miniature shops can be created with a smartphone. The shopping experience is social and fun and "about the people" as Chandra points out — more appealing than scrolling through pages of dresses or jeans on an e-commerce site.

Big money is pouring into consignment e-tailers.

Investors have taken notice. They are putting their dollars into Poshmark, Tradesy — which started out as a wedding re-seller — and The RealReal, known for its luxury brands and fine jewelry. Combined, these three companies have received $100 million in funding in recent months. Though consignment retailing is a fragmented market, a 2012 First Research report estimates industry sales at $14 billion (including furniture) according to NARTS: The Association of Resale Professionals.

Buying secondhand goods is a way to consume responsibly. Tradesy CEO Tracy DiNunzio explains they have "a more financially educated consumer who is choosing quality brands" over fast fashion. In fact, she claims, many of their consumers, mainly online fashion shoppers ages 20-50, are checking Tradesy for the resale value of handbags and shoes before making the investment at retail.

Since the recession, "consumers want value for their dollar," says Adele Meyer, executive director of NARTS.  Yet amidst a "don't buy unless it's marked down mind set," there is a high desire for brands, especially luxury goods, which generated €250 billion last year, according to Bain's Fall Winter 2015 Luxury Goods Worldwide Market Study.

Julie Wainwright, founder of The RealReal, talked about her expanding business and the potential for collaboration with brands in a recent Financial Times article. "[Tthe brands] are going through an evolution. Our first year, I heard they hated us. Now they are keen to find a way to work together. They've realized they can maybe learn something from our data." The RealReal annual brand rankings list the strongest at resale: Hermes, Louis Vuitton, Chanel and a resurgent Gucci. The company has also found consignment shopping is an entry point for Millennials who cannot yet afford full priced luxury brands.   

Chandra also sees ways to support brands, especially small and independent ones. Poshmark recently started a wholesale marketplace allowing their top sellers to buy from fledgling fashion companies, thus providing another marketing platform for newer and less-known brands.

Community is key.

Then there is the social aspect. "What I love about Poshmark is the community," says power seller Kelly Ross, who has more than 200,000 followers.  Many "poshers" become online friends and meet up at an annual gathering called Poshfest. Ross frequently interacts with her buyers, answering questions about items of interest, providing a personal service to her customers that's missing at most large retailers. Instead of sales associates, the work is distributed among 1,500,000 Poshmark sellers, a major saving on labor costs.

Building relationships between buyers and sellers also assures buyers they are getting an authentic Chanel bag or Cartier bracelet. With a burgeoning resale market comes the potential for more fakes to be circulated. To counteract the growing counterfeit issue, resellers have dedicated teams to screen out those attempting to sell imitations.

Consignment sellers are using authentication services, conducting physical product reviews, and using imagery techniques. Fake luxury handbags, jewelry, and watches are the most seized in the United States and Europe by customs and border patrol agents — the very products in high demand on consignment sites. Poshmark and Tradesy have established policies for taking returns from buyers if a product is found to be a copy. This problem is also compelling consignment e-tailers to create robust customer service operations. As DiNunzio from Tradesy says, "We want to be here for [their customers]," and the company has embedded the customer service function within its product team.

But scaling and sustaining a business is no easy feat, especially in the startup space. Thread Flip, another online consignment operator, folded earlier this year. Retailers such as Macy's and Neiman Marcus have taken notice of the de-cluttering movement and teamed up with ThredUP and TheRealReal, respectively, on closet cleaning and gift card promotions. This may be just the beginning of unlikely partnerships and converging trends, giving consumers more options on how, when and where they shop.

Nancy Gendimenico is the founder of brand development consultancy, Elan Brand Licensing LLC. Follow her on Twitter @ngendimenico.